Antitrust

In November 2017, the NCAA and 11 major athletic conferences agreed to pay $208 million to over 20, 000 current and former NCAA Division 1 student-athletes as a settlement for the group’s class action lawsuit. The lawsuit alleged that the NCAA and the 11 major conferences illegally capped scholarships.

It was an example of an antitrust class action lawsuit, a type of lawsuit in which a group of people sue an individual or organization for violating antitrust laws. Antitrust laws prohibit firms from practices like collusion, monopoly or cartel formation and other practices that restrict market competition. The most common antitrust violation is collusion, where firms cooperate to reduce competition between them.

The most common type of collusion is price fixing, an agreement, usually secret, between two or more firms to keep the price of a product or service they buy or sell at a fixed price. In the introductory example, the student-athletes sued the NCAA and 11 major athletic conferences for working together to fix student-athlete scholarships at amounts lower than they otherwise would be under a competitive market.

In another example, in December 2013, over 8,000 merchants filed an antitrust class action lawsuit against Visa, Mastercard and several major credit card companies for working together to fix swipe fees at high levels. The merchants not only received a $7.25 billion settlement from the credit card companies, they received a reduction in their swipe fees – a reduction in the cost of doing business for the merchants.